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KembaraXtra – Legal Terms – Preference
Preference has different meanings in insolvency law.
  1. It may refer to favouring one creditor over others before bankruptcy or liquidation, for example by repaying one creditor in full while others remain unpaid.
Under the Insolvency Act 1986, courts may reverse such transactions if they were motivated by a desire to improve that creditor’s position before insolvency.
  1. It may also refer to a floating charge created shortly before winding-up in favour of an existing creditor.
Such charges may be invalid if created while the company was insolvent and no fresh value was provided.
The law seeks to ensure fairness among creditors during insolvency proceedings.

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